India's growth seems secure despite global headwinds and uncertainties

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₹2.1 trillion, which is the highest half-yearly amount seen in the past four years and 3.8% higher than the already high subsidy burden in the corresponding period last year. Going forward, an increased subsidy burden could put pressure on the government’s capex plan as it tries to achieve its fiscal deficit target for 2023-24. With capacity utilization rising (74% as of the year’s first quarter), private investment is expected to pick up.

Corporate and bank balance sheets are also in good enough shape to support a firm capex recovery. Our analysis shows that for India Inc (a sample of 1,300 non-financial listed firms), capex in 2022-23 improved to reach 3.3% above the pre-covid level. A capex recovery is being seen in sectors like power, steel, cement and renewables.

However, a sharp pick-up in private sector capex remains elusive. Worryingly, the data shows that investment projects announced by the private sector have been going down in the last two quarters. After touching a high of ₹13.4 trillion in the fourth quarter of 2022-23, new projects announced reduced to ₹6.6 trillion in the following quarter and then to ₹1.2 trillion in the second quarter of 2023-24 (as per the Centre for Monitoring Indian Economy).

Investment projects announced give an indication of the intent to invest and hence is an important indicator to track. The private sector’s lower intent to invest could be related to election-related policy uncertainties and is worrisome. To add to domestic woes, uncertainties on the global front have got aggravated.